HHS Releases Obamacare's Long-Awaited Health Insurance Rules

English: Kathleen Sebelius speaking after her official nomination as Secretary of Health and Human Services. President Barack Obama is standing behind Sebelius (Photo credit: Wikipedia)

If the low point in the weekly news cycle – when politicians release bad news they hope few will notice – is late on a Friday afternoon, then the low point in the biannual news cycle has to be right before Thanksgiving after an election. The election’s winners are still elated, the losers are still subdued, and most ordinary Americans, regardless of politics, are long forward to a long weekend relaxing or shopping. It was that point, last Tuesday, and the Obama Administration chose to release long-awaited regulations that will have the most impact on the shape, and the price, of health coverage when Obamacare’s major provisions take effect a little over a year from now, on January 1, 2014.

Couched in the most terms describing a generous cornucopia of benefits, the new rules demonstrate – inadvertently, no doubt – how we are headed for a world of rising health insurance premiums, shortages of physicians and hospital beds, and, possibly, a future “solution” based on bureaucratic rationing and restricted eligibility for life-saving treatments.

“Insurers will not be able to charge someone more just because she is sick or because she used to be sick,” as Health and Human Services Secretary Kathleen Sebelius described the law’s ban on surcharges and exclusions for pre-existing conditions.

How much could this add to premiums? We can get an idea by looking at premiums for “guaranteed issue” insurance that already exists, as a result of the HIPAA law passed in 1996 (by a Republican Congress, and signed by President Clinton). HIPAA requires guaranteed issue insurance with no surcharges or exclusions for pre-existing conditions to individuals and families who’ve lost employer-sponsored coverage and exhausted their COBRA continuation coverage (if any).

To take an example, in Virginia CareFirst BlueCross charges $1978 per month for guaranteed issue coverage (with variations depending on the deductible the customer selects). An equivalent plan without guaranteed issue costs $333 per month. That’s a difference of $1645 per month, or almost $20,000 per year more. As it stands now, people with pre-existing conditions might find it worthwhile to pay that much, but others can get coverage at a much lower rate. But for 2014 and onwards, only the more expensive coverage will be available. This means that healthy families buying coverage on their own could see premium increases of $20,000 – a far cry from the decrease of $2500 promised by candidate Obama in 2008.

Of course, it is possible in theory that with more people, including healthy people, enrolling in guaranteed-issue insurance, the average health of the insurance pool would improve, and the premium increase could be lower than the full $20,000. But it is not likely to be much lower. Consider the decision from the point of view of a healthy customer with no pre-existing conditions. Would they rather pay an extra $20,000 for insurance, or pay a penalty of a few hundred dollars for not having “qualified” insurance? Especially if they know that if they ever develop a serious health problem, they can always get insurance at the same rate guaranteed issue rate that they would pay without it. (Even if they have to wait until the next calendar year to begin coverage, most people would have saved more than enough in the years before to pay out-of-pocket until the following year and still come out ahead.)

In other words, the same ban on on surcharges and exclusions for pre-existing conditions that makes it easier for those with pre-existing conditions to obtain coverage simultaneously makes going without insurance much more attractive for those without pre-existing conditions.

In addition, the new rules also require plan benefits in each state to be equivalent to those of a benchmark “typical employer plan” offered in that state now. The rules provide three options for selecting this benchmark plan, and in all cases the benchmark plan is likely to be more generous (read: more expensive) than a typical individually-purchased plan today. In other words, the most generous (expensive) plan of today will be the minimum plan in 2014. Lower-cost options would not be available.

More seriously, this combination of factors could lead to a collapse of the insurance market. Starting in 2014, the Department of Health and Human Services will have to approve the premiums of “qualified” health plans. Would Secretary Sebelius approve premiums of $24,000 per year? If so, she would be subject to criticism for raising nearly everyone’s premiums – and if not, insurance companies might not have enough money to pay claims in the new environment.

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I find it interesting that no one is comparing these Obamacare minimum essential benefits to Medicare. You have to do it state by state because of the way HHS did the benefits requirement but here in Massachusetts Obamacare is now officially better than Original Medicare at least here in Massachusetts

– Original Medicare costs $105 a month (unless you are wealthy in which case it costs much more and Obamacare redefines which seniors are wealthy, as in “many more of you”); Obamacare will cost $100 a month at the the highest range (most will get it free)

– Original Medicare has unlimited deductibles; Obamacare has a $2000 deductible (but it is waived for most common things except hospitalization)

– Original Medicare has no drug coverage; Obamacare has low cost drug coverage (better than originally proposed in 2011)

– Original Medicare has 20% co-pays for doctor and outpatient procedures after an annual deductible; Obamacare has minimial co-pays (after a $2000 deductible that does not apply to most doctor and outpaitnet visits)

Dennis, you’ve confirmed a fact I’ve argued for a long time – original Medicare (parts A and B) is lousy insurance coverage. It’s quite easy to find better coverage. Medicare Advantage plans are better. And – at least in Massachusetts – even ObamaCare is better.

However, that lousy original Medicare coverage is very expensive. As you state, the per person, per month premium is $105, or $1,260 per person, per year. The total cost of original Medicare is about $10,500 per person, per year. This means Medicare participants pay only about 12% of the total cost. The remainder – more than 9,000 per person, per year – is paid by the U.S. taxpayers, thanks very much.

One more fact about original Medicare – it will not reimburse for any medical treatment or medicines obtained outside the U.S. So, seniors who plan to travel outside the U.S. after you retire, be careful to buy medical insurance before you leave – at your own expense of course.

Dennis, I’m interested in where you are getting some of your numbers. Obamacare allows for several different plan offerings, how can you say that the deductible is $2,000? Deductibles will likely vary from $500 (maybe $250) to $5,000, depending on plan design and cost.

There is also no evidence to believe coverage through Obamacare will cost $100/month. It will vary by age, plan selection, and income (if eligibile for a subsidy). You should expect to pay much more than $100, and likely much more than current employer-sponsered coverage.

To be fair, Obamacare requires only pediatric vision coverage. An insurer could include adult vision coverage, and could probably charge extra for it.

Dennis makes one excellent point: If a private company offered coverage precisely identical to Medicare, that coverage would NOT meet the requirements to be a “qualified health plan” (which is what’s necessary to get out of paying the penalty for not having insurance). Medicare counts as “qualified” ONLY because the law specifically lists Medicare (and Medicaid, and a few other government programs) as “qualified.” Only plans offered to the public have to meet the requirements to be “qualified.”

All ANYONE has to do is look at Canada or other countries that have had socialized medicine for any amount of time, Financially (higher taxes, limited care, wait times, etc.) and they should be able to figure out it is a disaster. In the countries that have had it for a long time, over 50% of the population still buys some kind of other coverage to avoid the long wait time, or possible exclusion of critical, life saving treatment. Look at the length of time (hours and hours) some people spend in line just to get basic prescriptions in those countries. There is a reason a man from Boston created a company THAT DOES NOTHING BUT FACILITATE CANADIANS GETTING TO U.S. TO GET CARE THAT IS CRITICALLY NEEDED BECAUSE OF THE WAIT TIMES. Folks, if you have to wait 8 months to get an MRI in Canada, compare the population ratios, and you can figure over a year and half here in U.S. By that time your brain tumor could very likely be stage 4 or inoperable. I hope all the people that wanted OBAMACARE don’t find out the hard way, this is not what they think it is, or will be…….

Obama and many of his Left Wing colleagues are on record as wanting a single payer system. Their intent with this conglomeration of chutes and ladders is to collapse the private system leaving the Federal Government as the insurer of last resort. For all intents an purposes, this law nationalizes the private system. Let’s review: the federal government will dictate to the “Private” system WHAT they can sell, WHO they can sell it to, HOW they are permitted to sell it, HOW much they can charge, and HOW much they are allowed to earn. Where’s the private part? Here’s the best part, the dopey electorate thinks this is going to save money and cost less. One more review session: This is what you have to buy into..Obamacare is going to cover MORE people, for MORE things, for a LONGER period of time, with FEWER restrictions and exclusions and it’s going to cost LESS. You don’t have to be dumb to believe this, but it certainly does help.

Upon reading these comments, all I am seeing is comparisons to Medicare. What about the rest of the population who does not qualify for Medicare? The median income for a family of three in Kansas is a little more than $56K a year. On average, Americans in this group pay about 25% of that in overall taxes (not just federal taxes http://www.ctj.org/pdf/taxday2010.pdf), or an average of $14K. Add to that the estimated $20K just for HEALTH insurance. Then add the costs of auto insurance, home owners insurance and life insurance. The number a person comes up with is close to 75% of their gross income will be for nothing except taxes and insurance. That leaves these people with $1,833 a month to pay for mortgages, gasoline in their cars, car payments, groceries, utility bills, cell phones and all other monthly expenses. With the prices of these things expected to rise exponentially between now and then, I’m just curious how people are going to handle their new found poverty.

All you have to do is look at the video from Greece, France, Spain, etc. with rioting in the streets. That’s the same way all these people are going to handle it when the “free” health-care system runs out of money!!